Correlation Between CGI and Treasury Wine

Can any of the company-specific risk be diversified away by investing in both CGI and Treasury Wine at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CGI and Treasury Wine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CGI Inc and Treasury Wine Estates, you can compare the effects of market volatilities on CGI and Treasury Wine and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CGI with a short position of Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of CGI and Treasury Wine.

Diversification Opportunities for CGI and Treasury Wine

-0.36

Correlation Coefficient

CGI  Treasury Wine

Very good diversification

The 3 months correlation between CGI and Treasury is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding CGI Inc and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates and CGI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CGI Inc are associated (or correlated) with Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of CGI i.e., CGI and Treasury Wine go up and down completely randomly.

Pair Corralation between CGI and Treasury Wine

Considering the 90-day investment horizon CGI is expected to generate 5.55 times less return on investment than Treasury Wine. But when comparing it to its historical volatility, CGI Inc is 2.34 times less risky than Treasury Wine. It trades about 0.05 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  769.00  in Treasury Wine Estates on July 10, 2024 and sell it today you would earn a total of  46.00  from holding Treasury Wine Estates or generate 5.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CGI Inc  vs.  Treasury Wine Estates

CGI Inc

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CGI Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, CGI may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Treasury Wine is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CGI and Treasury Wine

The main advantage of trading using opposite CGI and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CGI position performs unexpectedly, Treasury Wine can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Treasury Wine will offset losses from the drop in Treasury Wine's long position.

The idea behind CGI Inc and Treasury Wine Estates pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.